tv Bloomberg West Bloomberg May 29, 2015 7:30pm-8:01pm EDT
>> virtual-reality takes center stage and silicon valley. what companies are poised to be the big winners in the art. i am brad stone and this is "bloomberg west." coming up, amazon milk, amazon baby food. we take a look at what jeff bezos has planned next. and should apple worry? a company's plans to expand in the u.s. i introduce you to the brains
behind twitter's plan to create original content. that is ahead on "bloomberg west." now to our lead. vr. those are the only two letters you need to know about what is next in tech. i'm talking about virtual reality of course. this week it seemed like everywhere you turned, there were stories about companies pushing into vr technology. in 15 years, we could see it everywhere from the hospitals to the courtrooms. so far, facebook, google, microsoft has spent billions on vr tech. products will hit the market soon. joining me now to discuss his report is senior research analyst at piper jaffray and an investor at hainan partners and silicon valley. thank you for joining us.
jean, 15 years from now, you say vr will be everywhere. are people ready? do people really want to appear and do virtual world? >> they are not ready now but they don't know what the value is for this and i think if they would understand what they can get out of it, they will be ready and it will take some time for the content, for the experience to be refined but as that gets refined, we think this will be as dramatic a technology for consumers as they smartphone was. we knew the smartphone was coming and ultimately, it has become much bigger then we got. that is probably where we are at in terms of vr. brad: everyone seems to think games will be the first application. you have seen failed attempts in
the past. we were just talking about the nintendo virtual boy. are you sure it starts with games and what are the obstacles do adoption? >> the days when i walk around like this -- it is probably several years from now. this is a space where the ecosystem clearly has to mature for people to feel comfortable enough to go forward with this. we saw the precursor for this and google glass and that is not have another application in the ecosystem to make it useful for consumers. i can see a first face phase of vr in the courtroom or hospital but having this in consumer play needs to have their differentiated apps. most likely games but game developers need to be really incentived. >> the oculus rift when it
launches next year could be around $1500. you said you think some of these firms will eventually have to give these devices away along with smartphones. what happens? what does the price points need to be at how quickly do they need to drive it down? >> gear vr is existing on current phones. in $1500 will be a little more interactive and immersive but to answer your question, the price points need to get down to $100, $200 for all the great experiences. we think this will take time. but hundred million units by 2025. ultimately, the price curves are going to flow quickly downward and that should really start to feel the demand for these devices.
>> let's move to augmented reality. apple just bought a company called matteo. tell us what apple was to do with this company. >> for some reason, all augmented reality companies i have seen are from europe. i don't know what is in the water there. >> do you not think it is a big opportunity? >> it is. apple was smart because they know they are going to drive this shift is -- if there is one and a lot of the companies we have seen before have been in the gaming sector or in location-based services but without that support of a big platform distribution, they have all fallen flat. if they are going to take shape and take hold in the consumers mind, it will have to be driven by some sort of big brother like apple. >> i was surprised to see in your report that ar lags vr, but
ultimately it is the bigger opportunity. why? gene: it is the blending of the virtual and the real world. there are applications of the amount of data that we see every day, the amount of information that can be overlaid with that that can create new experiences. think of what google glass tried to do, but an experience people wanted to use. imagine never forgetting somebody's name or being able to look at a building and know what tenet is in. it is infinite what can be done in augmented reality. where virtual-reality is a good starting point but it will be games and live entertainment. we think augmented reality is 70% of the opportunity longer term, but it will take longer to get to the displays right. brad: maha, do you agree with that? 70% of the opportunity eventually? maha: i think so. apple is trying to own the retail store. with their technology coming out, they are trying to have better analytics for retailers to understand who is buying what
and where and what quantities. having ar on top of the apple platform allows them to go deeper in their relationships with retailers. commerce will naturally follow. brad: i want to ask you both are what you make of google cardboard headset. this allows you to insert your phone and use it as a vr display. is google trying to be disruptive and is this a serious player to compete with facebook and microsoft? maha: i love what google is doing. they kind of threw a nuclear bomb into vr right away. they are like screw having it be commoditized in three years. they will commoditize it from the get-go. it is a phenomenal way of google entering the market. brad: gene, is google cardboard a serious entry in the market? gene: i think maha hit it right. they are making a statement.
they are trying to have a presence in vr. it is a great marketing trick to be a part of it. it increases the average person's awareness of ar. brad: ok, gene munster from piper jaffray, thank you. and, maha, you are staying with us today. it has been a busy week for dealmaking, especially in technology. avago is buying broadcom for $37 billion, marking the biggest tech deal of all time. there is also equinix acquiring rival telecity for $3.6 billion. and then there is intel. they are near a deal to buy altera for $15 billion. in consumer tech, facebook and apple alum dave morin is selling his social networking app path to daum kakao corporation. what is driving all the deals? it is the investors.
they are hoping consolidation can keep slowing technology growth. with cash piles huge and low interest rates, buyers can afford it. next, amazon taking a cue from walmart. we will tell you how jeff bezos is looking to expand. plus, hugo barra sits down with emily chang. we will show you what he has to say about expanding in the u.s. check out this creature from the m.i.t. robotics team. it is called a cheetah. it can clear hurdles all on its own. ♪
brad: some breaking news -- president obama says the senate must act to extend the nsa's phone dragnet methods first exposed by edward snowden. that program would have expired on sunday. another developing story -- silk road mastermind ross ulbricht sentenced to life in prison for creating the drug dealing website silk road. the federal judge believes he tried to arrange the murders of five people he wanted eliminated. amazon is expanding its grocery business. it is beefing up its private label lineup to include milk cereal and baby food. what will this move do for its bottom line?
joining us again is maha. why do retailers like amazon and walmart -- why do they do white label products? maha: they want to own the experience, own the margin structure. amazon in particular wants to own -- brad: the prices of these are cheaper so why are the margins higher? maha: i don't think they are higher -- it is higher than going through a branded middleman or a cpg manufacturer because they take those companies out of the picture. they take the middleman out of the picture. in amazon doing this, they are going for the lowest margin products on the grocery shelves. it is a confusing push. brad: amazon has been trying to private label products for 10 years. it started with kitchen stuff. it never really seemed to really
work. i thought that was because they didn't wanted to privilege their own stuff versus their manufacturing partners. and partly because it is not really customer centric. you are putting your products in front of your customer and yet here they are amplifying these programs. is this driven by business necessity? maha: it seems to me it is going against the grain which is why i'm confused. in this on-demand, excess capacity, collaborative consumption model, you are seeing companies like instacart pop up that are taking advantage of the no-capitalized model of selling groceries. brad: instacart fulfills from costco or whole foods and delivers it. maha: it is a delivery on-demand model for groceries. amazon is going retro and taking the web band circa 1999 approach which is we will own the warehouses, the trucks and even own the supply chain in selling milk and baby food -- brad: they did diapers last year and then they had to stop the
sell because of the manufacturer. what are the risks here? what does amazon need to be worried about? maha: amazon becomes a consumer packaged goods companies and there are risks associated with that going as far as having fun with the fda and dealing with any outbreaks, particularly with dairy foods. and, they are owning the supply chain through the delivery so there is really no one to blame but themselves for a really low-margin product. brad: they can drive prices down which they love to do. we have seen amazon expand same-day delivery to 14 cities. it seems like they have really started to notice companies like instacart, maybe one day uber, that turns stores into delivery nodes.
is amazon trying to take into account this next wave of delivery services? maha: without question. they are trying to own the customer experience, period. in that means going through the grocery chain and actually just providing the last mile, they will do that as long as it is amazon branded. if it means in the case of milk, owning the middle, branding the milk -- they will do that. as long as you as a customer are feeling you are immersed in the amazon experience. brad: what do you think amazon milk tastes like? maha: what does amazon prime milk taste like? [laughter] brad: even better. thank you, maha. google is holding its annual developers conference in san francisco this week. xiaomi's hugo barra was at the event and sounded excited about what he saw.
hugo barra: it was a big google i/o. possibly the biggest we have ever had in terms of all the announcements that came in because android am, which we have been waiting for -- love what they have been doing. android pay which we knew what was going to happen, but it is a big deal from an ecosystem perspective. i'm really excited about the internet of things initiative because it really means android finally manages to expand to anything really that one can think of -- in the home, in the office and whatnot. i'm very excited about that. we will be riding all these trends, using all these new stk's. i'm looking forward to getting my hands on it. brad: barra made his name as the public face of android. he left google in 2013 for xiaomi. emily chang asked him if he was going to build his own os to compete with android. hugo: we would not build our own
operating system for smartphones or tvs or these products simply because it does not make sense to do that. we would much rather use that engineering horsepower building interesting services and capabilities on top of android that add value versus starting again. there is no real reason to do that. if you think about it, if you build an operating system, you need to build a developer ecosystem and that is one of the hardest things to do. everyone who tried has completely failed despite having the resources we would have as a startup. we would not. brad: catch the full interview with hugo barra on "studio 1.0" thursday nights at 7:30 p.m. right here on bloomberg tv. coming up, there are celebrities and then there are internet celebrities. we are talking social media superstars with a startup that gets them paid.
brad: time now for the daily byte, one number that tells a whole lot. today it is $4 million. that is the ucla scholarship fund launched the team behind "the big bang theory." the show's cast, producers and sponsors are contributing to the fund for low-income stem students. it follows a pay dispute among
the cast last year that turned out well for jim parsons, johnny galecki and kaley cuoco. they now make $1 million an episode. needless to say, the stars can afford to sponsor aspiring scientists and engineers. the first 20 scholars will be announced this fall. it is the age of the social media star. the selfie generation that has figured out to build an online following of millions and big brands want in. niche is the startup that makes that happen. they pair companies with social media stars for advertising. three months ago, they were snapped up by twitter and since then the creator account has doubled to 11,000. joining us now is niche cofounder rob fishman in new york and maha is with us as well. rob, niche is no longer niche. that was low hanging fruit. tell us, for the uninitiated what are internet celebrities and give us an example? rob: over the last few years
the advent of mobile applications like twitter and periscope has given rise to new content creators. they have worked in ad agencies or even high school students that have amassed audiences of millions, tens of millions of followers who tune in every day to see what the latest is with those folks. brad: do they have any hesitance about bringing advertisers into their spots? in previous generation, we might have thought about that as selling out but they seem to be embracing advertisers. rob: we look at it as selling in. they need to support themselves and they are creating free content for their fans every day. we try to pair them up with best brands. the numbers speak to that. brad: maha, tell us what victorious is and what the advantages are of not just twitter but other platforms like snapchat and youtube. maha: once the social media
celebrities have amassed enough of an audience or following, they find the economics do not work in their favor. they are pumping tens of millions of views on a monthly basis on youtube or twitter and really not getting a huge piece of the economics. eventually they want more. our company victorious is helping to make mobile apps and marketing so that the social media star can then have their own little place or big place where the followers can truly follow. brad: rob, niche was acquired by twitter around the same time twitter acquired periscope. tell us how niche is doing and what role you are planning. rob: it is really exciting for us. brands were increasingly coming
to twitter and saying i love that you have hundreds of millions of viewers, but i don't know what to say on twitter. a tweet is no longer 140 characters -- you need videos and animations. we have the best content creators in the world and we can team up with brands to create content that travels across the twitter universe. it is a perfect combination of the creative force of the talent and the distribution. brad: rob, do brands have any fears about being integrated or accompanying this kind of user generated content were sometimes anything goes? rob: yeah, there was definitely trepidation early on. most of our clients are repeat customers and they come to us because they've get the look and feel of user content. we work very closely with some of the biggest brands in the
world to partner with these creators to get their ideas and concepts. everything is looked at before it goes live. you get the look and feel with the vetting process that brands expect elsewhere. brad: maha, how big is this opportunity? maha: that is a mix of authenticity and ugc, yet some sort of production value. we believe the same thing -- i believe the same thing that as the stars grow, they will need to produce content that their mass audience is more comfortable and digestible. brad: ok, niche co-founder rob fishman, and maha, my guest host for the show. thank you. that is everything in this edition of "bloomberg west." tune in monday for a conversation with rich riley. we will see you then. ♪
' ' e respect" to fifa's sepp blatter, you can count on our support for the right price. ♪ mark: on the show tonight, the music man -- bernie sanders faces the music and the ed gillespie musical. first, the latest news from the indicted former house speaker, dennis hastert of illinois. news organizations reporting he allegedly paid a younger male hush money to conceal sexual misconduct that occurred during his time as a high school wrestler coach and teacher in illinois.